Revenue must lead positive evidence to establish disputed

Revenue must lead positive evidence to establish disputed transactions before shifting burden onto assessee

Issue

Whether reassessment proceedings under Section 148 should be dropped at the initial stage when an assessee pleads identity theft and denies involvement in high-value transactions.
Whether the burden of proof rests on the Revenue to establish through positive evidence that the disputed transactions were performed by the assessee before shifting the onus onto the assessee.

Facts

The assessee, a salaried individual, filed a return declaring an income of approximately ₹4.16 lakhs for AY 2022-23 and denied engaging in any business activity.
A notice under Section 148A(1) was issued citing large-value business transactions linked to his PAN, including purchases of ~₹11.16 crores and GST sales of ~₹24.03 crores and ~₹29.46 crores.
The assessee denied any connection with the entity “Hari Om Traders”, pleaded identity theft, and submitted evidence of filing a complaint in Delhi jurisdiction and approaching GST authorities.
The Assessing Officer rejected the assessee’s plea and passed an order under Section 148A(3), initiating reassessment proceedings by issuing a notice under Section 148.

Decision

In favour of Revenue (Reassessment initiation): Held that the stage was not set to accept the assessee’s defence outright and drop the reassessment proceedings; the proceedings under Section 148 remain valid for further inquiry.
In favour of Assessee (Burden of proof): Held that since the assessee pleaded a negative fact supported by steps taken against identity theft, the Revenue is not absolved of its responsibility. In the ensuing reassessment, the Revenue must first lead primary positive evidence establishing that the transactions were performed by the assessee before the onus shifts back to the assessee.

Key Takeaways

Reassessment vs. Defence Consideration: Reassessment proceedings under Section 148 need not be dropped at the Section 148A stage solely based on an assessee’s defense of identity theft, as the truth of the matter can be examined during reassessment.
Burden of Proof on Negative Facts: When an assessee asserts a negative fact (non-execution of transactions) backed by prima facie action like reporting identity theft, the initial burden rests on the Revenue to produce primary positive evidence linking the assessee to the transactions.
Prerequisite for Shifting Onus: The onus to disprove involvement shifts to the assessee only after the Revenue discharges its primary burden of establishing that the disputed transactions belong to the assessee.

HIGH COURT OF ALLAHABAD

Vyome Mehta

Income-tax Department

Saumitra Dayal Singh and Arun Kumar, JJ.

WRIT TAX No. 3376 of 2026

AUGUST 6, 2026

Haya Rizvi and Zia Rizvi, Counsels for the Petitioner. Ankur Agarwal, Dhananjay Awasthi and Rajesh Tripathi, Counsels for the Respondent.

ORDER

1. – Heard Sri Vaibhav Kush along with Sri Nitin Kumar, learned counsel for the petitioner and Sri Ankur Agarwal, learned Senior Standing Counsel for the revenue.

2. Present writ petition has been filed to challenge the re-assessment proceedings initiated against the petitioner under the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the A.Y. 2022-23.

3. The petitioner describes himself to be a salaried employee of a private Corporation. Alternatively, it has been stated that the petitioner had never engaged in any business activity of sale or supply of goods or services. For the assessment year in question, the petitioner had filed its Income Tax Return disclosing annual income Rs.4,15,630/-. He had not derived any other income. In those circumstances, the petitioner was surprised to receive show cause notice dated 30.3.2026 issued under Section 148-A(1) of the Act. In that, reference has been made to information derived under the risk management strategy through the Income Tax Portal. In short, information has been drawn of business transactions and the income referable to the PAN of the petitioner. Thus in paragraphs 3 and 4 of the Annexure to the said show cause notice, it has been observed as below:-

“3. As per the available information, you have made following transaction(s) during the financial year 2021-22:

Sr. No.	Information Description	Information Source	Transaction Value (In Rs.)
1	Purchase transaction by dummy entity	As per report of DDIT/ADIT (Inv.)1(1), New Delhi	11,16,10,199
2	Total Sales reported under GSTR-1	GSTIN	24,03,22,375
3	Total Sales reported under GSTR-3B	GSTIN	29,46,36,781
4	TDS Statement-Fees for Professional; Services or Royalty	FOOD SAFETY AND STANDARDS AUTHORITY OF INDIA DELHI	5,83,597

4. On further query made on Income tax Business Application & E-filing portal of Income tax Department, it is noticed that you have filed Return of Income on 17.07.2022 for the Assessment Year under consideration at total income of Rs.4,15,630/- which does not commensurate with the above said transactions.”

4. The petitioner responded to that notice and completely denied the fact of business transactions, vide its written reply. While admitting salary income Rs.4,15,630/- he has completely denied knowledge of the business entity Hari Om Traders (described as a proprietary concern of the petitioner) and has further completely denied any business transaction performed by him in that trade name. He has also completely denied association with the business address of the said Hari Om Traders, as disclosed to the GST Authority at Jhuggi NP-8, Road No.77, Rajiv Gandhi Camp, Punjabi Bagh, Delhi.

5. Having thus denied its connection with Hari Om Traders and having completely denied any business conducted by him, the petitioner has further stated that his identity may have been stolen specifically, while he submitted certain online loan applications.

6. Also, the petitioner claims to have made enquiries from GST Authority wherein he has received an e-mail dated 29.4.2026 from the GST Authorities. In material part it reads as below:-

“The matter has been examined and it is observed that an application for seeking registration was submitted vide ARN AA070921022970B on 08/09/2021 in the name of M/s Hari Om Traders by Sh. Vyome Mehta R/o B 201, Kaushambi, Sahibabad, Ghaziabad, UP. For this purpose, a copy of the PAN and Aadhar card were submitted which were pertaining to Sh. Vyome Mehta. From the record it seems that the registration was granted as per provisions of GST Act 2017. However, during the field visit, it was reported that the firm was not found existing at the given principal place of business. Accordingly, the registration of the firm was suspended after giving an opportunity to submit an explanation. The registration of the firm was Suo Moto Cancelled on 29/04/2022 vide ARN ZA070422241658H from the date of registration. A copy of all documents which were furnished at the time of seeking registration are attached herewith. The firm operated its business for three months i.e. October, 2021 to December, 2021. However, the registration of the firm was suo moto cancelled from its date of registration restricting all the transactions done by it during the above period. As per portal, the given email id is: vyome5643@outlook.com and the mobile number is: 8447286736.”

7. While such objections were raised by the petitioner, the Income Tax Officer has rejected the same and passed an order dated 16.6.2026 under Section 148-A(3) of the Act. After taking note of the objections filed, the authority has found the same untenable. Referring to the prima facie material available and treating the same to be relevant, re-assessment proceedings have been drawn.

8. Submission is that the objections raised by the petitioner have not been dealt with, point-wise. No reason has been ascribed to turn down any of the specific objections raised. Since petitioner has not conducted any business transaction, he therefore claims, he may not be subjected to reassessment proceedings, unless preliminary enquiries are made to ascertain that it is the petitioner, who is the real person behind the business transactions evidenced in the name of Hari Om Traders.

9. On the other hand, learned Senior Standing Counsel for the revenue contended, upon the amendment made to the law, the revenue is only obligated to establish existence of relevant material. The strict test of “reason to believe” as was available earlier, no longer applies. Further, it has been submitted that dealing with the objections in terms of the law laid down by the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC)/(2003) 1 SCC 72 (as relied by learned counsel for the petitioner) and as is also a statutory requirement under the amended law, may never amount to recording detailed reasoning on the individual merits of the objections. First, that is not the scope of the objection to be dealt with and second, if that course were to be adopted, it would be prejudicial to the assessee as tentative conclusions could have been drawn even before the re-assessment proceedings commenced. To the extent, there is no challenge to the relevancy of the material relied by the revenue in the context of proposed re-assessment proceedings, no further requirement of recording detailed reasons, may be imposed on the revenue, in these facts.

10. Having heard learned counsel for the parties and having perused the records, even though the rule of recording “reasons to believe” to initiate the assessment proceedings, no longer exists, for the purpose of Section 148-A(1) of the Act the assessing authority is only required to pass an order determining “whether or not it is a fit case to issue notice under Section 148”.

11. Seen in that light, no detailed “reasons to believe” are required to be recorded by the assessing authority to initiate the assessment proceedings. As to what may constitute determination- that it is a fit case to issue notice under Section 148 of the Act, the time tested rule of relevancy of the material and application of mind to the objection raised, may still survive.

12. In the present facts, it is admitted to the petitioner that the revenue has in its hands information drawn from its portal. It is referable to the PAN of the petitioner. Under the present scheme and regime, all transactions performed by a person where client details are admitted, get reflected on the Common Portal by such transactions being linked to the PAN identity of a person. That has led to the present grievance of the petitioner. While the petitioner does not dispute that certain financial transactions have been linked to its PAN, he disowns his involvement with those transactions. In that he claims that his identity has been stolen. He has lodged a complaint under Delhi jurisdiction. It is pending. He has also made enquiries and thereafter lodged complaint with GST Authorities. Though GST Authorities have issued an e-mail communication to the petitioner disclosing certain facts in their knowledge, no enquiry has yet been conducted by the GST Authorities and therefore, no positive finding may have been returned by them that the petitioner is not the person who may have performed the transactions giving rise to the impugned proceedings. The information reveals that the registration under the GST Act was granted on the identity of the present petitioner. At the same time, it has been narrated that on field inspection, the firm was not found existing at the given principal place of business. Notice issued remained unresponded. Accordingly, registration has been cancelled. Further no bank account is found attached to the GST account. To the extent, no enquiry has been conducted by the GST Authorities and further to extent the Income Tax Authorities are within their rights to conduct an independent inquiry for the purposes of the Act, the communication issued by the GST Authorities is not of conclusive value. It plainly causes no effect, at present.

13. To conclude, while the petitioner’s defence may remain alive during the re-assessment proceedings, at present, the stage was not set for the revenue authorities to pass any other order to accept the petitioner’s defence as may lead to re-assessment proceedings being dropped. To accept the defence of petitioner, evidence would have to be led, documents would have to be examined and enquiry would have to be made before firm conclusion of identity theft can be drawn. That may be done only during the course of proper assessment/re-assessment proceedings. At the preliminary stage, in the context of the amended law, no further enquiry was required to be made to determine that this is a fit case for re-assessment proceedings to arise. However, this is not to say that the revenue is absolved of its responsibility to lead positive evidence to establish that the disputed transactions were performed by the petitioner. Once the petitioner has pleaded a negative fact and subject to his substantiating that stand before the assessing authority, the burden to establish the positive fact that the petitioner and no other had performed the transaction giving rise to the allegation of escapement of income, would have to be discharged by the revenue. Unless primary evidence is lead, the onus may not shift on the assessee.

14. With the above observations, the writ petition is disposed of. In reassessment proceedings, the petitioner would have all opportunity to lead such evidence in defence as it may be advised.